At the time of writing this post, the TRA has undertaken a dumping assessment in 5 transition reviews (total 8 assessments). These are welded tubes (China), welded tubes (Russia), welded tubes (Belarus), glass fibres (China), biodiesel (USA), cold-rolled flat steel (China), cold-rolled flat steel (Russia) and rebar (China).
The TRA has also done a dumping assessment in the aluminium extrusions (China) investigation. However, this is a new investigation and not a transition review (see separate blog post on the dumping assessment for China in aluminium extrusions). The transition reviews are effectively the equivalent of an expiry review. Rather than looking at solely whether dumping was occurring in a recent period (as in a new investigation), the transition reviews look at whether dumping would be likely to continue or recur if the measure is removed.
Of the above 8 assessments, only welded tubes (Belarus, China, Russia) has been completed. However, in the other 5 cases, the TRA has published a statement of facts which sets out their preliminary likely dumping assessment. This post reviews how the TRA has approached likely dumping in all of these assessments, bearing in mind that the final decisions may yet vary.
UK legislation on likely dumping in transition reviews
Regulation 99A of the Dumping & Subsidy Regulations sets out the dumping requirements for a transition review:
In a transition review, the TRA must consider whether….the dumping of goods subject tor review would be likely to continue or recur if the anti-dumping amount…were no longer applied to those goods…
In addition, the statutory guidance to the TRA by the Secretary of State identifies the following factors that may be considered:
Production capacity - spare capacity that may indicate exporters would be able to resume dumping if measures were removed
Ability to shift production to the goods concerned
Normal value in comparison to UK prices
Exports to 3rd markets - are exports being dumped or are they subject to AD measures?
Conditions in the exporter’s home market - low demand and low prices
The TRA must have regard to this statutory guidance in performing its functions.
One other point of note is that the UK legislation allows the TRA to vary the level of the duty in all transition reviews.
Analysis has been limited by low imports and non-cooperation
To be fair on the TRA, any comments made on these transition review assessments must take into account the fact that, in each of these cases, there have been very low levels of imports and high levels of non-cooperation.
The TRA has decided that when import levels are low, they are not able to recalculate the level of the duty. This decision is discussed further below. In addition, because the level of cooperation has been low and, at best, partial, there has been a general lack of availability of reliable data. The TRA has, therefore, been limited in making its assessments on the basis of facts available. The truth is that not too much can be read into their approach of assessing likely dumping in a case where there are no imports and a high level of cooperation. However, this post does take a look at how the TRA has undertaken the assessment when it has to be done on the basis of facts available.
What price analysis has been done?
In most of these cases, the TRA has obtained at least some information allowing a certain level of price analysis. The analysis has included the following:
Comparison of export prices to 3rd countries against domestic price in the country being investigated
Comparison of prices based on UK import data for imports from the country being investigated and imports from all sources.
Comparison of unit value prices based on export data of the country being investigated for exports to UK verses exports to all sources.
Comparison of export prices to 3rd countries verses UK domestic price
Comparison of ‘indicative’ domestic price for the country being investigated with UK market prices to assess if there is an ‘incentive’ to dump.
These various types of comparisons have been undertaken to assess if the UK market is likely to be an attractive market for the exports and if the exports are likely to be at dumped prices. In principle, even based on data for which the reliability of which could not be verified, these comparisons can all be useful to making reasonable inferences on the likelihood of dumping.
However, I do have some concerns about the indicative domestic price analytical approach.
Incentive to dump based on indicative domestic prices
The most common price analysis that has been done in most of the cases mentioned above has been based on ‘indicative domestic prices’. The source of the domestic prices used has varied (e.g. information provided by the exporting government, partial information provided by non-cooperating exporters, industry/market publications etc.). The data falls into the category of ‘facts available’ and this is the way it is treated by the TRA. The analysis certainly has not been presented as a definitive analysis but it has proved to be significant in the TRA's decision-making.
The indicative domestic price analytical approach can be summarised as follows:
TRA identifies an indicative domestic price (sometimes as a range)
Adjustments are made to this price (e.g. freight and insurance) to give an indicative UK landed CIF price
TRA compares this price to the market price in the UK (usually the price of the UK domestic producers)
In most of the cases, the indicative UK landed CIF price was greater than the UK market price. This was used as the basis of a conclusion that the exporters could not enter the market without dumping and thus taken as an indicator of likely dumping.
However, in one of the cases (Welded Tubes - Russia), the indicative export price was lower than the UK market price and it was concluded that the exporters had no incentive to dump as they could gain market share without dumping.
At first glance it appears like an odd approach to make any assessment of likely export price starting from a domestic price. However, it can be noted that the TRA was guided to this approach by the Secretary of State as a ap can be used as facts available. Once the authority has initiated an expiry review, therefore, it has already established that there is some initial evidence that dumping is occurring. that might be considered (the list of factors is provided above).
One of these factors is ‘normal value in comparison to UK prices’. This is further clarified as follows:
If overseas exporters have a normal value higher than the price level in the UK domestic market, this may indicate that they would need to dump if they were to continue or resume exporting.
Expressed in these terms, and alongside the other factors from the list, this is not an unreasonable approach when working with facts available. However, an important point can be noted here. The guidance proposes this factor in terms of an indication whether an exporter would need to dump if they were to continue or resume dumping. It is not expressed the other way round i.e. if the indicative export price is below the UK market price, this may indicate that the exporters would not need to dump. This is basically the situation that was found in the welded tubes (Russia) transition review.
I think that the indicative domestic price methodology is highly problematic if it used to make a conclusion that dumping is unlikely. The truth is that the information on which it is based is just too unreliable to make any firm conclusions as to whether dumping is likely or unlikely. In this regard, it is important to be aware of the context within which this analysis might be used. If exporters cooperate in the investigation, they can have a normal value constructed on the basis of actual data. In this case, the indicative domestic price methodology would not have to be used to analyse likelihood of dumping.
However, if exporters do not cooperate, the investigating authority is authorised to use best information available. The best information may be highly flawed and thus caution should be used in making any conclusions from the data. The WTO agreement makes it clear that if an industry party does not cooperate the result could be less favourable than if the party did cooperate. This means that the investigating authority has considerable discretion in how it uses facts available.
I think that there is a unique problem that the TRA faces in terms of the transition reviews. In a normal expiry review, the investigating authority will have accepted an application from the domestic industry requesting that the measure be continued. Thus the investigating authority will already have entered into detailed discussions with the applicants and will have required them to have provided sufficient evidence that dumping is likely. In the absence of other reliable information, the information in the application, which will have been verified by the TRA, can be used as facts available. Once the authority has initiated an expiry review, therefore, it has already established that there is some initial evidence that dumping is occurring.
This is not the case in the transition reviews due to the highly unusual situation of the UK leaving the EU customs union. The TRA has no information already on the file as they would in an expiry review. This means that the TRA has just had to do its best in terms of doing an analysis of likely dumping. However, it is my view that the TRA has to be extremely cautious in making a conclusion that dumping is not likely in the absence of verified information from cooperating exporters.
A final point to be made here is that the indicative price analysis assumes that exporters are operating according to normal commercial incentives. The motivations for dumping are not always clear and thus it cannot be assumed that normal market incentives apply. The 'incentive to dump', therefore, cannot be simply determined from crude price comparisons.
Does the indicative price methodology create an incentive not to cooperate?
In some of the transition reviews, the information used for the indicative domestic price has been provided by the exporting government.
Of course, the intention of the TRA analysts in trying to get the best out of any data that is provided is good. When there is a high level of non-cooperation, all data is potentially useful in terms of providing at least some 'facts available'.
Issues only arise where the crude indicative price methodology might be used to determine that dumping is not likely. If exporters see that there is a chance that transitioned measures will not be maintained on the basis of information provided by their government, they have less incentive to cooperate in the investigation. Further, governments have a vested interest in providing only information helpful to their arguments. Whilst all parties have an incentive to provide information that is helpful to their case, once exporters forego their right to cooperate in the investigation thus denying the TRA the ability to verify the accuracy of information received, there is a question over whether the TRA should be using such anecdotal and partial information to make critical assessments on likelihood of dumping.
State distortions and likely dumping
There is a question as to how the issue of state distortions should be treated when using the indicative domestic price analytical approach. The issue has been addressed by the TRA in a number of the transition reviews so far. For example, :
Welded tubes from Belarus - UK industry claimed that Belarus is a non-market economy. The TRA concludes that the indicative domestic price range "is subject to distortions" and so "is not representative of an adjusted normal value for Belarus". The TRA found that that the indicative UK landed export price was likely to be competitive which, according to the indicative price analytical approach set out above, could be taken as an indicator that dumping was not likely. However, the TRA concluded that, taking into account the distortions, normal value was likely to be higher than the indicative prices and, thus, it was found that dumping was likely. The TRA makes no conclusion as to whether Belarus is a non-market economy or whether the distortions constitute a particular market situation.
Cold-rolled flat steel from Russia - A particular market situation (PMS) was found in relation to two cost items and an upward adjustment was made to the indicative domestic price. In principle this is a reasonable approach, although there is a question mark as to whether adjustments make sense given that this is such a crude analytical approach.
HFP Rebar from China - The TRA found that it was unable to assess PMS due to a lack of cooperation. The TRA states that the presence of PMS is "not a material consideration" due to the fact that they did not use a normal value. According to the TRA's indicative Chinese domestic price analysis based on price information not adjusted for PMS, the data already suggests that Chinese exporters would have to dump to compete on the UK market. Presumably, the presence of PMS would be a material consideration if the indicative price analysis had suggested dumping was unlikely.
I could make the point that it does not appear that the TRA has developed a consistent approach in relation to PMS when there are are no imports and lack of cooperation from exporters. However, this would be unfair given how new the UK system is. Lack of cooperation does mean that a detailed assessment of PMS is not possible. It is not surprising that it may take the TRA a few cases to develop a consistent approach in this regard.
One thing is clear though. Where there is PMS, indicative price analysis becomes even more unreliable.